Source: ForexYard
The EUR was not able to hold its recently stable price against the US dollar as regional investors battled over the direction of the 17-nation common currency. Regional bears won the day as the rumor mill chewed on the speculative reports that Greece was considering an ill-favored response to its recent debt flare-up. The instability resulting from this news has appeared to be push the EUR/USD lower.
Economic News
USD – USD Bullish as Greek Concerns Resurface
The US dollar rebounded strongly versus the euro and pound yesterday as traders began to bail out of the region from fear that euro zone policymakers would fail to meet the Greek debt crisis rapidly enough. The result has been for the EUR/USD to move strongly bearish, with $1.45 well in reach. Against the pound, the greenback jumped towards 1.6330, though bullishness in Britain has generated pressure beneath the Cable in anticipation of an uptick.
News out of Europe yesterday appears to have offered support to the dollar by moving traders away from the region out of worries of a possible Greek default. The publication of euro zone PPI yesterday did not support this movement, however, as inflationary growth hints at pressure on the region to adjust its stance on interest rates.
For today, US data is expected to be light with only a mild release relating to economic optimism and consumer credit. American political turmoil has riled investors lately, with Nobel Prize winning economist Peter Diamond catching flak from US congressmen over whether he had the requisite crisis management experience to sit on the Federal Reserve Board of Governors; a post he was recently nominated for by President Obama. The US dollar has gained from recent risk aversion, with its own economic fundamentals appearing soft, but data from yesterday has begun to shift this sentiment lightly.
EUR – EUR Bearish as Investors Seek Safety
The euro fell from its monthly high versus the US dollar yesterday, with a price of $1.45 rapidly approaching. As speculators tore into the euro zone with a harsh reaction to the news of Greece’s reaction to austerity measures and its debt concerns, the EUR felt the sting and dropped to as low as $1.4575 in late trading hours.
The EUR was not able to hold its recently stable price against the US dollar as regional investors battled over the direction of the 17-nation common currency. Regional bears won the day as the rumor mill chewed on the speculative reports that Greece was considering an ill-favored response to its recent debt flare-up. The instability resulting from this news has appeared to be push the EUR/USD lower.
As for today, the euro zone will be largely absent from the economic calendar with several weaker reports, predominant among them is the region’s retail sales report. The figure comes just days ahead of the euro zone’s release of its interest rate publication this Thursday. Should these reports generate speculation over an ECB rate hike, forex traders could see some volatile upticks in the EUR pairs.
JPY – JPY Continues to See Mixed Results
The Japanese yen (JPY) has been trading with somewhat mixed results since Friday, with gains made against several currencies and losses elsewhere. After a week of ups and downs, the Japanese yen appears set to take losses today as investors appear to be seeking higher yields. The dominant stance of risk aversion overarching yesterday’s environment of pessimism has many traders moving towards the yen against the higher yielding currencies like the euro, which dropped to a six-week low during yesterday’s afternoon sessions.
The yen was slightly higher versus the US dollar as the pair moved closer to previous intervention levels near 80.00. The USD/JPY held steady at yesterday’s low, finding support near 80.00 and moving up towards 81.20 at today’s opening Asian sessions. Market news released out of the US and Europe today will likely be the driving force behind JPY values.
Oil – Crude Oil Prices Continue Plummet from Yesterday
Crude Oil prices dropped sharply yesterday with the New York Mercantile Exchange session closing just below the $98.60 price mark. Investors have turned their attention to the Organization of Petroleum Exporting Countries (OPEC) for its report on production levels as tensions in member state Libya continue to fester. Expectations are for a call by OPEC to boost output in its upcoming meeting in Vienna.
The value of the US dollar versus the euro in recent trading has dropped from its monthly low near 1.4550 but oil prices failed to find support as a result. With yesterday’s sharp downtick during the later sessions, and this morning’s continuation of that movement, traders appear likely to see oil reaching a bit lower as this week comes to an end – though a return to riskier assets could lift oil prices one more time if the market deems it worthy.
Technical News
EUR/USD
The current rally has helped the pair climb above the 61.8% Fibonacci retracement level from the May downtrend at 1.4570. While monthly stochastics are beginning to roll over, both the weekly and the daily stochastics are moving sharply higher. The pair could continue to rise where it may encounter resistance off of the previous trend line from the January to May rally which comes in at 1.4750. This level has further significance as it coincides with the late April/early May lows. Further strength would test the May high at 1.4940 while any pullback could find support at 1.4450 from Friday’s low, followed by 1.4310.
GBP/USD
Sterling is showing a few signs of weakness versus the dollar as daily stochastics are declining and a failed attempt to close the week above the 1.6515 resistance level. A move higher would then test the April high at 1.6745 followed by the 2009 high at 1.0755. To the downside the 20-day moving average may prove to be supportive at 1.6305 as well as the trend line rising from the May 2010 low which comes in at 1.6150. A breach here would expose the May 2011 low at 1.6055.
USD/JPY
Yen strength has reemerged and the pair looks to test its post-intervention lows from early May at 79.56. A break of this level exposes the pre-intervention low at 76.11 as the charts are absent of any significant support levels. To the upside, 81.75 should see some resistance followed by the May high at 82.15.
USD/CHF
A new week and a new high for the Swiss franc as the USD/CHF traded as low as 0.8326. Falling stochastics on the weekly chart point to further potential declines in the pair. Traders may find opportunities to enter into the downtrend on a pullback in the pair. Support is located at the May low of 0.8550 followed by the falling trend line off of the February high at 0.8770.
The Wild Card
NZD/USD
The Kiwi continues to perform well versus the dollar and on Friday the pair found support near 0.8070 from a short term trend line that rises off of the mid-May low. The pair has since rallied and is currently testing the 0.8200 resistance level. A breach here and the next barrier the NZD/USD will face is the all-time-high set last week at 0.8260, with scope to reach as high as 0.8400. Forex traders may want to be long on the NZD/USD with a stop below Friday’s low. More risk adverse traders may set their stop below the rising trend line which comes in today at 0.8110.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
